Sterling weakens against the dollar

Sterling fell against the dollar yesterday with weak consumer morale output and jobs figures keeping investors focused on a sharply slowing UK economy and the prospect of further interest rate cuts.

According to data British manufacturing output fell unexpectedly in March at its sharpest rate in six months as a decline in car production led to a retreat after two months of span growth.

The market players are awaiting the Bank of England s announcspanent of interest rate decision today.

The Nationwide building society's consumer confidence index for April fell sharply to 70 from the March reading of 77. This added to the fears regarding the strength of UK economy.

The Halifax house price survey released on Friday showed the first annual fall in property prices in around a decade boosting expectations for interest rate cuts.

The Halifax house price survey showed prices in the three months to April fell 0.9 percent versus a year ago. Consensus forecast was for a 0.8 percent fall.

In the last meeting Fed cut its overnight lending rate by 25 basis points to 2 percent and signaled that its next move would depend on developments in financial markets and the economy. The Fed s signal boosted the optimism of the traders in the currency market. Since mid Septspanber the U.S. central bank has slashed the fed funds rate target by 3.25 percentage points to shore up the economy.

Market research firm GfK NOP's monthly consumer confidence barometer fell to 24 in April from 19 in March its lowest level since Novspanber 1992.

The unchanged expectation of a rate cut even after the release of BOE minutes weigh on the cable. The Bank of England minutes showed two votes against easing policy this month. In its first three way split in two years the nine span Monetary Policy Committee had six votes for this month's 25 basis point cut to 5 percent one vote for a bigger 50 basis point move and two votes for unchanged rates.

Bank of England Governor Mervyn King had said that the central bank was facing the challenge of balancing the possibility of weaker growth due to the credit crunch with higher inflation pressures has been weighing on cable .

Last day in spot trading sterling closed at 1.9535 against the dollar after trading in the range 1.9735 1.9500.

Medium term outlook

Trading below 2.0000 is the sign of weakness. Supports are 1.9800 1.9600 1.9385 resistances are 2.0275 2.0400.

Last day DGBP traded in the range 197.49 194.50 and closed at 194.77. Sterling daily chart (spot)

TECHNICAL OUTLOOK (Intra day)

DGBP (June) Bullish above $195.66 bearish below $ 195.12